Compound interest
The mechanism by which interest earned on a principal is added to that principal and itself generates interest in subsequent periods. The effect is exponential over long horizons: doubling the investment horizon nearly quadruples the total gain. Popularised by the (incorrectly) Einstein-attributed quote: "the eighth wonder of the world".
Why It Matters
The silent engine of financial independence. Ankora concretely illustrates the impact of starting early and regularly: 100 €/month at 5 % over 30 years = 83 000 €, of which 47 000 € is pure interest.
Concrete Example
Initial capital 5 000 € invested at 4 % over 20 years with compound interest → 10 956 €. With simple interest, only 9 000 €. The 1 956 € difference comes solely from interest on interest.